Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended: December 31, 1995 Commission
file number 1-5558
Katy Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware
75-1277589
(State of Incorporation) (IRS Employer
Identification Number)
6300 S. Syracuse #300, Englewood, Colorado
80111
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (303)
290-9300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock, $1.00 par value New York
Stock Exchange
Common Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
___________
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO ____
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant, as of February 29, 1996 was
$56,410,000. On that date 8,413,287 shares of Common Stock,
$1.00 par value, were outstanding, tzhe only class of the
registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 annual report to shareholders of Katy
Industries, Inc. (The "1995 Annual Report") are incorporated by
reference into Parts I and II of the Form 10-K and portions of
the definitive Proxy Statement of Katy Industries, Inc. (The
"1996 Proxy Statement") with respect to the 1996 annual meeting
of shareholders are incorporated by reference into Part III of
this Form 10-K.
Exhibit index appears on page 17. Report consists of
18 pages
Part I
Item 1. Business
Katy Industries, Inc. ("Katy" or the "Company") was
organized as a Delaware corporation in 1967, and carries on
business through three principal operating groups: Distribution
and Service, Industrial and Consumer Manufacturing, and
Machinery Manufacturing. Katy also has equity investments in
two companies. Each Katy subsidiary has its own management and
the head of each subsidiary is responsible for the business and
affairs of that company. Nevertheless, each enterprise
operates within a framework of broad policies and corporate
goals established by Katy's corporate management, which is
responsible for overall planning, financial management,
acquisitions, dispositions and other related administrative and
corporate matters.
Management continuously reviews each of its businesses. As
a result of these ongoing reviews management may determine to
sell certain companies and may augment its remaining businesses
with acquisitions. Any acquisitions would be funded through
current cash balances, available lines of credit and/or new
borrowings.
As a result of recent acquisitions and dispositions, Katy's
operating groups have been realigned and renamed and the
business units reclassified during 1995. All operating data
for years prior to 1995 has been reclassified to reflect this
change. Selected restated operating data for each operating
group is incorporated herein by reference to "Managements
Discussion and Analysis of Financial Condition and Results of
Operations" in the 1995 Annual Report. Information regarding
foreign and domestic operations and export sales is
incorporated herein by reference to Note 10 of the consolidated
financial statements of Katy in the 1995 Annual Report. Set
forth below is information about Katy's operating groups,
investments, and Katy's business in general:
Distribution and Service Group
This group's principal business is the distribution of
electronic components and nonpowered hand tools. Other
companies in this group operate cold storage facilities,
operate a waste-to-energy facility and provide specialty metal
products to a wide range of high-tech industries. In 1995 the
group accounted for 41% of the Company's total sales. The
companies in this group do not experience a seasonal sales
trend, and all have a number of competitors, some of which are
larger and have greater financial resources. The five business
units comprising this group are described below:
GC Thorsen, Inc. GC Thorsen, acquired by Katy in April of
1995, is headquartered in Rockford, Illinois and has a sourcing
office in Taiwan. GC Thorsen is a leading value-added
distributor of electronic and electrical parts and accessories,
and nonpowered hand tools. In addition, the company produces
a full line of home entertainment, service technician products
and component parts.
Waldom Electronics, Inc. Waldom, located in Chicago,
Illinois, is a leading distributor of high quality, brand name
electronic and electrical components, and loudspeakers and
their components. Waldom distributes primarily to the
electronic, automotive and communication industries.
Hamilton Precision Metals, Inc. Hamilton, located in
Lancaster, Pennsylvania, mills a wide range of precision
rerolled metal strip and foil for the medical, electronics,
aerospace and computer industries. The company's products are
used in a wide range of high-tech applications.
C.E.G.F., U.S.A. This 95% owned company is headquartered
in Plant City, Florida, and operates a refrigeration and cold
storage facility there and one in Houston, Texas. The
facilities serve the needs of a variety of firms in the frozen
food, grocery and seafood industries.
Savannah Energy Systems Company Savannah operates a waste-to-energy
incinerator facility in Savannah, Georgia.
Industrial and Consumer Manufacturing Group
The group's principal business is the manufacture,
packaging and sale of sanitary maintenance supplies, abrasives
and paints and stains. The group accounted for 29% of the
Company's sales in 1995. The paint and stain manufacturer
experiences seasonal sales trends, while the other companies do
not. All have a number of competitors, some of which are
larger and have greater financial resources. The three business
units comprising this group are described below:
Glit/Microtron Abrasives Glit/Microtron, headquartered in
Wrens, Georgia, also has a manufacturing facility in Pineville,
North Carolina and a sales office in Mississauga, Ontario,
Canada. Glit/Microtron manufactures nonwoven floor maintenance
pads, scouring pads and sponges, and specialty abrasive
products for cleaning and finishing. Products are sold
primarily to the sanitary maintenance, restaurant supply and
consumer markets. In addition, Glit/Microtron manufactures a
line of wood sanding products which are sold through retail
stores across the United States and Canada. Consumer products
are marketed under the brand names Hannah's Helper and
Kleenfast through supermarket and drug and variety stores.
Gemtex Abrasives Gemtex, which was acquired by Katy in
August of 1995, is headquartered in Etobicoke, Ontario, Canada
and has an additional manufacturing plant in Buffalo, New York.
Gemtex is a manufacturer and distributor of coated abrasives
for the automotive, industrial and retail markets.
Duckback Products, Inc. Located in Chico, California,
Duckback is a manufacturer of high-tech exterior transparent
stains, coatings and water repellents. These products are sold
under the trade names Superdeck, Supershade and Fightback.
Machinery Manufacturing Group
The principal business of this group is the manufacture of
machinery for the food packaging, food processing and wood
working industries. One company manufactures testing and
measuring instruments for the electrical and electronic markets
and recording devices for the transportation industry, and
another produces gauging and control systems for the
metalworking industry. Sales of the group accounted for 30% of
the Company's sales in 1995. The companies in this group do
not experience seasonal sales trends. All the companies in the
group have a number of competitors, some of which are larger
and have greater financial resources. The six business units
comprising this group are described below:
Beehive, Inc. Located in Sandy, Utah, Beehive is a leading
manufacturer in the specialized field of mechanical meat and
food separation equipment for the food processing industry.
Approximately 50% of Beehive's sales are made outside the
United States.
Bach Simpson, Ltd. Bach Simpson is a manufacturer of
transportation test and monitoring system equipment, speed
indicators, fuel gauges, and specialized diagnostic and testing
products. Primary markets served are the railroad and general
industrial markets. Bach Simpson is located in London,
Ontario, Canada and has a sales office in Cary, Illinois.
Peters Machinery Company Peters, which designs and
manufactures proprietary machinery for producing and packaging
cookie and cracker sandwiches, is located in Chicago, Illinois.
Diehl Machines, Inc. Diehl, located in Wabash, Indiana,
is a pioneer in the production of ripsaws, veneer splicers,
automatic lathes and moulders. Primary customers are in the
millwork industry and manufacturers of doors, windows, cabinets
and furniture.
Airtronics Airtronics, which is located in Elgin,
Illinois, supplies the metalworking industry with engineered
gauging and control systems. In addition, Airtronics rebuilds
and resells centerless grinding machines.
Walsh Press Company Walsh, located in Forest Park, Illinois
is a supplier of parts and service specific to owners of
mechanical clutch and flywheel punch presses.
Investments, at equity
Katy has investments, at equity, in two companies. Bee Gee
Holding Company, Inc. harvests shrimp off the coast of South
America and processes shrimp and other seafoods in Tampa,
Florida for the domestic and foreign market. Schon & Cie, AG,
and its subsidiaries, manufacture a wide range of mechanical
and programmable four post, web and flat bed die-cutting
equipment and shoe manufacturing machines. These companies
have a number of competitors, some of which are larger and have
greater financial resources. For additional information
related to investments, reference is made to Notes 3 and 12 of
the Notes to Consolidated Financial Statements in this report,
which information is incorporated herein by reference.
Raw Materials
Katy operations have not experienced significant difficulty
in obtaining raw materials, fuels, parts or supplies for their
activities during the most recent fiscal year, but no
prediction can be made as to possible future supply problems or
production disruptions resulting from possible shortages.
Employees
Katy employed 1,109 people as of December 31, 1995,
approximately 109 of whom were members of various unions.
Katy's labor relations are generally satisfactory and there
have been no strikes in recent years which have materially
affected its operations.
Environmental Policies and Controls
Katy does not anticipate that federal, state or local
environmental laws or regulations will have a material adverse
effect on its consolidated operations or financial position.
Katy anticipates making additional expenditures for
environmental control facilities during 1996, in accordance
with terms agreed upon with the United States Environmental
Protection Agency and various state environmental agencies.
(See Part I, Item 3 - Legal Proceedings - Environmental Claims)
Licenses, Patents and Trademarks
The success of Katy's products has not depended on patent
and license protection, but rather on the quality of Katy's
products, proprietary technology, contract performance and the
technical competence and creative ability of Katy's personnel
to develop and introduce saleable products.
Research and Development Costs
Research and development costs are expensed as incurred and
are not material to Katy's operations.
Item 2. PROPERTIES
As of December 31, 1995, Katy's total building floor area
owned or leased was 2,013,000 square feet, of which 1,371,000
square feet were owned and 642,000 square feet were leased.
The following table shows by industry segment a summary of the
size (in square feet) and character of the various facilities
included in the above totals together with the location of the
principal facilities.
Industry Segment Owned Leased Total
(in thousands of square feet)
Distribution and Service -- primarily plant and
office facilities with principal facilities
located in Savannah, Georgia; Chicago, Illinois;
Plant City, Florida; Houston, Texas;
Lancaster, Pennsylvania; and Rockford, Illinois.. 629 511 1,140
Industrial and Consumer Manufacturing -- primarily
plant and office facilities with principal
facilities located in Wrens, Georgia; Pineville,
North Carolina; Chico, California; Buffalo,
New York; Etobicoke and Mississauga, Ontario,
Canada ....................... 264 111 375
Machinery Manufacturing -- primarily plant and
office facilities with principal facilities
located in Sandy, Utah; Elgin, Forest Park, and
Chicago, Illinois; Wabash, Indiana; and London,
Ontario, Canada................................ 340 2 342
Corporate -- office facilities in Englewood,
Colorado and Elgin, Illinois and rental
properties in Elk Grove Village, Illinois;
Elkhart, Indiana; and New York, New York...... 138 18 156
1,371 642 2,013
All properties used in operations are owned or leased and are
suitable and adequate for Katy's operations. It is estimated
that approximately 94% of these properties are being utilized
and are fully productive.
Item 3. LEGAL PROCEEDINGS
Except as set forth below, no cases or legal proceedings
are pending against Katy, other than ordinary routine
litigation incidental to Katy and its businesses and other
non-material cases and proceedings.
1. In Re Katy Industries, Inc. Shareholders Litigation,
Civil Action No. 12612 (Chancery Court, new Castle County,
Delaware); filed November 13, 1992.
On February 22, 1996, this action, described in Katy's
Form 10-K for the year ended December 31, 1994, was dismissed
by stipulation of the parties to the action, without prejudice
to the members of the purported class on whose behalf the
action was brought.
2. Mendel, et. Al. V. Carroll, et. al., Civil Action No.
13306 (Chancery Court, New Castle County, Delaware); Filed
December 22, 1993.
On December 22, 1993, a purported stockholder of the
Company filed an alleged class action complaint against the
Company and its Board of Directors, which raised three counts.
Count I alleged, among other things, that the Company's Board
of Directors breached its fiduciary duties in connection with
the June 1992 proposal, since withdrawn, by the family of
Wallace E. Carroll, former Chairman of the Company, to acquire
the minority interest in the Company, by failing to dilute the
Carroll family's interest to below a majority of the
outstanding shares. Count II alleged that the Carroll family
breached its fiduciary duties to the minority stockholders of
the Company by (I) announcing that the Carroll family's
interest in the Company was not for sale and (ii) enforcing an
agreement among Carroll family members that required family
members to offer their shares in the Company to other family
members before selling them to a third party. Count III
challenged a 1988 assignment by Katy of a right to receive a
percentage of revenues from an oil and gas field in Indonesia
to certain entities owned or controlled by the Carroll family
and alleged that such assignment was without consideration and
constituted an illegal waste of Katy's assets. The complaint
sought, among other things, (I) an order enjoining defendants
from refusing to maximize the value of the Company's stock and
damages in connection therewith, (ii) an order enjoining the
Carroll family from enforcing its agreement among family
members described above and from otherwise taking actions
designed to reduce the demand for the Company by other bidders,
and (iii) an order rescinding the challenged assignment of oil
and gas interests.
An agreement has been reached by the parties to dismiss
this action without prejudice to the members of the purported
class on whose behalf the action was brought. A Stipulation of
Dismissal is expected to be filed shortly.
3. Pensler Capital Partners, I.L.P., et. al.v. Katy
Industries, Inc., et. al., Civil Action No. 13386 (Chancery
Court, New Castle County, Delaware); filed February 18, 1994.
On February 26, 1996 this action, described in Katy's Form
10-K for the year ended December 31, 1994, was dismissed by
stipulation of the parties to the action, without prejudice to
the members of the purported class on whose behalf the action
was brought.
4. Environmental Claims
(1) United States vs. Midwest Solvent Recovery,
Inc., et. al. And (Third Party Action American Can Company et. al.
Vs. Accutronics, et. al., Case no. 79-556 (U.S. D Indiana). Third Party
Complaint filed January 17, 1985 (Size Control Company, a former division
of a subsidiary of Katy, is a third party defendant).
(2) United States vs. W.J. Smith Wood Preserving Co.,
Civil No. S-87-193 CA (U.S. District Court, Eastern District of Texas,
Sherman Division); and Texas Water Commission Administrative Enforcement
Action.
(3) Notice of Potential Liability, issued by United States
Environmental Protection Agency to LaBour Pump Company, a former division of
a Katy subsidiary, concerning Himco Dump site in Elkhart, Indiana.
(4) Notice of Potential Liability, issued by United States
Environmental Protection Agency to Katy concerning Double Eagle Refining
site in Oklahoma City, Oklahoma.
(5) Notice of Potential Liability, issued by United States
Environmental Protection Agency to Katy concerning Galaxy/Spectron Refining
site in Elkton, Maryland.
(6) Notice of Claim - Medford, Oregon.
(7) Demand for Indemnification - Northampton, Massachusetts.
(8) Demand for Indemnification - Southington, Connecticut.
(9) Notice of Potential Liability, issued by United States
Environmental Protection Agency to Katy concerning Old Southington Landfill
Site in Southington, Connecticut.
(10) Notice of Potential Liability, issued by Kansas Department of
Health and Environment to Panhandle Industrial Company, Inc. concerning
municipal landfill in McPherson, Kansas.
(11) Demand for Indemnification - Londonderry, New Hampshire.
(12) Request that Katy join Potentially Responsible Party Group -
Fuels and Chemicals Superfund Site, Coaling, Alabama.
(13) Demand for Indemnification - Elgin, Illinois.
In matters (1, (3), (4), (5), (8), and (9) above, the
United States is alleging, under the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"
or "Superfund"), that various generators and/or transporters of
hazardous wastes are responsible for the clean-up of certain
sites where there have been releases or threatened releases of
hazardous substances into the environment. One or more Katy
subsidiaries, or former subsidiaries, has been identified as a
potentially responsible party ("PRP") in these matters. Under
the federal Superfund statute, parties are held to be jointly
and severally liable, thus subjecting them to potential
individual liability for the entire cost of clean-up at the
site. These costs are, by nature, difficult to estimate and
subject to substantial change as litigation or negotiations
with the United States, states, and other parties proceed.
In the Midwest Solvent case, matter (1) above, the United
States brought action to recover its costs in completing the
initial clean-up of two dump sites. A number of original
defendants in the case filed a third party complaint against a
former Katy subsidiary, Size Control Company ("Size Control"),
and other PRP's, for contribution. Size Control disputed
liability. A partial settlement agreement was entered into
pursuant to which the United States has been reimbursed for its
initial clean-up costs. Size Control has entered into a
settlement, approved by the court, in order to settle its
liability in this matter. Pursuant to this arrangement and
assuming that projected clean-up costs are accurate, Size
Control will pay approximately $200,000 over ten years, of
which approximately $83,000 has been paid to date.
The W.J. Smith case, matter (2) above, originated as an
enforcement action for civil penalties and injunctive relief
under the Federal Resource Conservation and Recovery Act
("RCRA"). The United States Environmental Protection Agency
("USEPA") alleged violations of RCRA based upon the alleged
status of sludge drying beds of W.J. Smith Wood Preserving
Company, a Katy subsidiary ("W.J. Smith"), as a hazardous waste
management unit. A consent decree was entered in this case on
November 8, 1989. The consent provided for a $60,000 civil
penalty that was paid in December, 1989, clean closure of the
sludge drying beds , and installation of a new groundwater
monitoring system.
The Texas Water Commission's ("TWC") administrative
enforcement action was settled with the entry of an Agreed
Order (the "Order") on January 20, 1988, whereby a civil penalty
of $8,800 was assessed against W.J. Smith, $3,300 of which was
deferred so long as W.J. Smith complies with the terms of the
Order. The Order required W.J. Smith to: close an earthen
basin and the sludge drying beds; conduct soil and groundwater
contamination studies; and, if necessary, propose and implement
a remedial action plan. On September 27, 1990, the TWC issued
a notice of solid waste violations to W.J. Smith.
In 1993, TWC referred the entire matter to the USEPA,
which initiated a Unilateral Administrative Order Proceeding
under Section 7003 of RCRA against W.J. Smith and Katy. The
proceeding requires certain actions at the site and certain
off-site areas as well as development and implementation of
additional cleanup activities to mitigate off-site releases.
In December, 1995, W.J. Smith, Katy and USEPA agreed to resolve
the Proceeding through an Administrative Order on Consent under
Section 7003 of RCRA. Pursuant to the Order, W.J. Smith is
currently implementing a cleanup to mitigate off-site releases.
Since 1990, the Company has spent in excess of $4,000,000
in undertaking cleanup and compliance activities in connection
with this matter and has established a reserve for future such
activities. The Company believes that the amount reserved will
be adequate, however, total cleanup and compliance costs cannot
be determined at this time.
Concerning matter (3) above, on April 20, 1989, USEPA
issued a Notice of Potential Liability to a former division of
a Katy subsidiary and thirty-six other PRP's concerning the
Himco, Inc. Dump site in Elkhart, Indiana. The notice stated
that USEPA was planning to spend public funds to perform a
remedial investigation and feasibility study ("RIFS") at the
site unless such action was undertaken by responsible parties,
and identifies all recipients of the notice as PRP's. The
notice also requested further information. There was no
agreement among PRP's to perform the RIFS and, therefore, USEPA
undertook to perform it. USEPA issued another general notice
with regard to this site and Katy and its counsel are
continuing to investigate this matter. The liability of Katy's
subsidiary cannot be determined at this time.
Concerning matter (4) above, on September 26, 1989, USEPA
issued a Notice of Potential Liability to Katy and numerous
other PRP's concerning the Double Eagle Refinery site in
Oklahoma City, Oklahoma. The notice identifies all recipients
as PRP's, demands reimbursement for $145,000 for its costs and
requests information. Katy has disputed any liability with
respect to this matter and Katy's liability, if any, cannot be
determined at this time.
Concerning matter (5) above, on March 19, 1990, USEPA
issued a Notice of Potential Liability to Hamilton Precision
Metals ("Hamilton"), a subsidiary of Bush Universal Inc. (A Katy
subsidiary) and numerous other PRP's concerning the second
phase of a cleanup of the Galaxy/Spectron Site in Elkton,
Maryland. In September, 1991, Hamilton elected to participate
in such cleanup. To date, Hamilton has paid approximately
$1,600 in connection therewith. The future liability of
Hamilton cannot be determined at this time.
Concerning matter (6) above, by letter dated August 20,
1993, a claim was asserted by Balteau Standard, Inc. ("Balteau")
against Katy concerning PCB contamination at the Medford,
Oregon facility of a former division of a Katy subsidiary.
Balteau has demanded that Katy accept financial responsibility
for investigation and cleanup costs incurred as a result of the
contamination. Cost estimates for the cleanup currently range
between $2,000,000 and $3,000,000. Katy and Balteau have
agreed to share such costs. Pursuant to such agreement, Katy
provided a trust fund of $1,300,000 to fund cleanup costs at
the site. The agreement also called for Balteau to provide the
next $450,000 of cost, with any additional costs to be shared
equally between the two parties. Katy believes the cleanup has
been successful and has requested the Oregon Department of
Environmental Quality to inspect the property and approve the
remediation work and release Katy from any further liability.
Concerning matter (7) above, on March 9, 1992, Katy
received a letter from Wallace International Silversmiths, Inc.
("Wallace") requesting that Katy assume Wallace's defense in a
case captioned Katherine M. Georgianna v. Wallace International
Silversmiths, Inc., Case No. Civ. 91-11820N (U.S. District
Court, District of Massachusetts); filed July 9, 1991. Such
request stems from certain agreements among Katy, Wallace and
other parties (the "Agreements"). The case at issue concerns
alleged dumping of hazardous waste on property located in
Northampton, Massachusetts, states claims under CERCLA and
state law, and seeks unspecified monetary damages. Katy does
not believe that it has any obligation to assume Wallace's
defense in this matter and no material developments have
occurred with respect to this matter. Katy's liability, if
any, cannot be determined at this time.
Concerning matter (8) above, on July 9, 1992, Katy
received a letter from Syratech Corporation ("Syratech")
requesting that Katy indemnify Syratech for any liability
incurred by it in connection with the investigation and cleanup
by USEPA of the Solvents Recovery Service Of New England
Superfund Site in Southington, Connecticut (the "Southington
Site"). Such request stems from the Agreements. On April 22,
1993, USEPA sent Katy a Notice of Potential Liability with
regard to the Southington Site, which indicated that Katy was
responsible for all or a portion of the contamination at he
Southington Site that USEPA had previously attributed to
Syratech. Katy and its counsel have determined that the volume
of materials that USEPA has sought to attribute to Katy and its
subsidiaries is small in quantity. On February 15, 1994, USEPA
sent a letter to Katy and certain other PRP's advising these
parties of an opportunity to enter into a "de minimis"
settlement agreement with USEPA concerning alleged liability
for cleanup of the Southington Site. All PRP's that sent no
more than 10,000 gallons of material to the Southington Site
are eligible to participate. The terms of the offer require
the settlors to pay their volumetric share of the estimated
costs of cleanup of the Southington Site, plus a premium of
153%. As of April 1994, USEPA estimated total cleanup costs at
$73,740,665. Under the terms of the offer, Katy is eligible to
participate in the settlement if it elects to do so. Katy also
has the option of delaying its participation in the settlement
in favor of a second phase comprehensive settlement of this
matter and the Old Southington Landfill matter (see matter (9)
below). If Katy elects to participate in such a second
settlement it will be subject to an interest charge at the rate
of 8.75% per annum for any amounts due as of the payment date
of the first phase settlement. Katy's liability in this matter
cannot be determined at this time.
Concerning matter (9) above, on January 21, 1994, USEPA
sent a Notice of Potential Liability to Katy advising Katy that
it is potentially liable under CERCLA and RCRA for the costs of
remedial investigations and remedial actions to clean up
hazardous substances disposed at the Old Southington Landfill
Site in Southington, Connecticut. USEPA alleged that Katy's
former subsidiary, Wallace Silversmiths, sent hazardous
substances to Solvents Recovery Services of New England (see
matter (8) above), which in turn, sent an unspecified amount of
these materials to the Old Southington Landfill Site for
disposal. At this time, USEPA has not produced any direct
evidence concerning the alleged transactions between the two
sites. Katy's liability with regard to this matter cannot be
ascertained at this time.
Concerning matter (10) above, on May 22, 1992, Panhandle
Industrial Company, Inc., a Katy subsidiary ("Panhandle"),
received a notice from the Kansas Department of Health and
Environment stating that Panhandle may be responsible under
Kansas law for a portion of the cleanup costs relating to a
municipal landfill in McPherson, Kansas. Present cleanup cost
estimates for the landfill approximate $1,000,000. Panhandle,
together with other PRP's, are currently negotiating an
agreement to fund investigation and cleanup activities.
Panhandle's liability cannot be determined at this time.
Concerning matter (11) above, in September 1993, Katy
received a letter from counsel to Allard Industries, Inc.
("Allard") requesting that Katy and its subsidiaries, American
Gage and JEI Liquidating, Inc., indemnify Allard for any
liability incurred by it in connection with a case captioned
Town of Londonderry v. Exxon Corporation, et al., Case No. C-93-95-L
(United States District Court, District of New
Hampshire). Such request stems from certain agreements among
Katy, Allard and other parties. The case at issue concerns the
disposal and treatment of hazardous wastes and substances at a
landfill site in Londonderry, New Hampshire (the "Londonderry
Site"), states claims under CERCLA and state law, and seeks,
inter alia recovery of response costs with respect to the
Londonderry Site, declaratory judgment with respect to the
defendants' liability for future response costs and unspecified
monetary damages. Katy has agreed to defend and indemnify
Allard in this matter. Katy and its counsel have not yet fully
evaluated the underlying claims and the liability of Katy and
its subsidiaries with respect to this matter, if any, cannot be
determined at this time.
Concerning matter (12) above, in December 1993, Katy
received a letter addressed to LaBour from Stephan K. Todd,
Chairman-Fuels and Chemicals CERCLA PRP Group. Mr. Todd
contended that LaBour is a PRP at the site, and requested that
LaBour join the Fuels and Chemicals PRP Group, which would
require payment of administrative costs, as well as a share of
past and future remediation costs. The extent of these costs
is not known at this time. Katy has agreed to pay
approximately $5,000 in settlement of its liability in this
matter, to the extent that total cleanup costs are less than or
equal to $5,000,000, and has agreed to a formula for future
contribution to the extent that total cleanup costs exceed
$5,000,000. Katy's future liability with respect to this
matter, if any, cannot be determined at this time.
Concerning matter (13) above, American Gage received a
claim from Elgiloy Limited Partners ("Elgiloy") requesting that
it pay costs associated with the cleanup of solvent
contamination at Elgiloy's Elgin, Illinois property pursuant to
the terms of a Settlement Agreement, General Release and
Covenant Not to Sue which American Gage executed on September
25, 1989. Under such agreement, American Gage agreed to pay
67.7% of future costs associated with environmental cleanup
activities at such property, up to a maximum of $500,000.
American Gage and Elgiloy are currently in the process of
identifying those environmental cleanup activities. The total
amount of American Gage's liability cannot be determined at
this time.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the fourth quarter of 1995.
PART II.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding the prices of and dividends on the
Common Stock, and certain related matters, is incorporated
herein by reference to "Shareholder Information" at the inside
back cover of the 1995 Annual Report. Katy's Common Stock is
traded on the New York Stock Exchange ("NYSE"). As of
February 29, 1996, there were 1,485 record holders of the
Common Stock and there were 8,586,087 shares of Common Stock
outstanding.
Item 6. SELECTED FINANCIAL DATA
The information set forth under "Financial Highlights" in
the 1995 Annual Report is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information set forth under "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
in the 1995 Annual Report is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Katy, including
the notes thereto, together with the report thereon of Deloitte
& Touche LLP in the 1995 Annual Report are incorporated herein
by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS
ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
Part III.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of Katy is incorporated
herein by reference to the information set forth under the
section entitled "Election of Directors" in the 1996 Proxy
Statement.
Information regarding executive officers of the Company is
incorporated herein by reference to the information set forth
under the section "Information Concerning Directors and
Executive Officers" in the 1996 Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
Information regarding compensation of executive officers
is incorporated by reference to the materials under the caption
"Executive Compensation" in the 1996 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding beneficial ownership of stock by
certain beneficial owners and by management of Katy is
incorporated herein by reference to the information set forth
under the section "Security Ownership of Certain Beneficial
Owners" and "Security Ownership of Management" in the 1996
Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related
transactions with management is incorporated herein by
reference to the information set forth under the section
"Certain Relationships and Related Transactions" in the 1996
Proxy Statement.
Part IV.
Item 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
The following financial statements are incorporated
herein by reference to the 1995 Annual Report
1995 Annual
Report Page
Independent Auditors' Report
Consolidated Balance Sheets as of December 31,
1995 and 1994
Statements of Consolidated Operations for the
Years Ended December 31, 1995, 1994 and 1993
Statements of Consolidated Shareholders' Equity
for the Years Ended December 31, 1995, 1994 and 1993
Statements of Consolidated Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The Financial statement schedules filed with this report
are listed on the "Index to Financial Statement Schedules."
3. Exhibits
The exhibits filed with this report are listed on the
"Exhibit Index."
(b) Reports on Form 8-K
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 29, 1996 KATY INDUSTRIES, INC.
Registrant
President, Chief Executive and Operating Officer
POWER OF ATTORNEY
Each person signing below appoints John R.
Prann, Jr. and Stephen P. Nicholson, or either
of them, his attorneys-in-fact for him in any
and all capacities, with power of
substitution, to sign any amendments to this
report, and to file the same with any exhibits
thereto and other documents in connection
therewith, with the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated as of this 29th day of March, 1996.
Signature Title
/S/Philip E. Johnson Chairman of the Board and Director
Philip E. Johnson
/S/John R. Prann, Jr. President, Chief Executive Officer,
John R. Prann, Jr. Chief Operating Officer and Director
(Principal Executive Officer)
/S/ Stephen P. Nicholson Treasurer and Chief Financial Officer
Stephen P. Nicholson Principal Financial and Accounting Officer)
/S/ Glenn W. Turcotte Executive Vice President and Director
Glenn W. Turcotte
/S/ W. F. Andrews Director
W. F. Andrews
/S/ D. B. Carroll Director
D. B. Carroll
/S/ W. E. Carroll, Jr. Director
W. E. Carroll, Jr.
/S/ A. R. Miller Director
A. R. Miller
/S/ W. H. Murphy Director
W. H. Murphy
/S/ L. Raettig Director
L. Raettig
/S/ C. W. Sahlman Director
C. W. Sahlman
/S/ J. Saliba Director
J. Saliba
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
Independent Auditors' Report 15
Schedule II - Valuation and Qualifying Accounts 16
All other schedules are omitted because they are not
applicable, or not required, or because the required
information is included in the Consolidated Financial
Statements of Katy or the Notes thereto.
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
KATY INDUSTRIES, INC.
ENGLEWOOD, COLORADO
We have audited the consolidated financial statements of Katy
Industries, Inc. and subsidiaries (the "Company") as of
December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995, and have issued our report
thereon dated February 29, 1996; such financial statements and
report are included in your 1995 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also
included the financial statement schedule of Katy Industries,
Inc., listed in Item 14. This financial statement schedule is
the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Chicago, Illinois
February 29, 1996
KATY INDUSTRIES, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Thousands of Dollars)
Balance at Additions Recoveries Balance
Beginning Charged to Credited to Other at End
Description of Year Expense Expense Adjustments of Year
Reserves deducted from
assets to which they apply:
Year ended December 31, 1995:
Reserve for doubtful accounts:
Trade receivables $ 3,183 $ 257 ($ 105) $ 12 (a) 886
( 2,461) (e)
Current notes and other
accounts receivable 854 422 ( 54) ( 256) (a) 966
Long-term notes receivable 2,500 0 0 0 2,500
$ 6,537 $ 679 ($ 159) ($2,705) $4,352
Year ended December 31, 1994:
Reserve for doubtful accounts:
Trade receivables $ 7,975 $ 548 ($ 1,725) ($ 4,515) (a)
900 (c)$3,183
Current notes and other
accounts receivable 10 708 ( 97) ( 67) (a)
300 (d) 854
Long-term notes receivable 1,700 0 ( 447) 1,547 (b)
( 300) (d) 2,500
$ 9,685 $ 1,256 ($ 2,269) ($ 2,135) $6,537
Year ended December 31, 1993:
Reserve for doubtful accounts:
Trade receivables $ 8,877 $ 583 ($ 45) ($ 732) (a)
( 708) (c)$7,975
Current notes and other
accounts receivable 10 30 ( 57) 27 (a) 10
Long-term notes receivable 4,755 1,000 - ( 4,055) (a) 1,700
$13,642 $ 1,613 ($ 102) ($ 5,468) $9,685
(a) Doubtful accounts written off against the reserve.
(b) Reclassification from (to) other balance sheet accounts.
(c) Adjustment due to the fluctuation of foreign exchange rates.
(d) Reclassification from long-term to current notes receivable.
(e) Adjustment due to deconsolidation of subsidiary
KATY INDUSTRIES, INC.
INDEX OF EXHIBITS
DECEMBER 31, 1995
Exhibit
Number Exhibit Title Page
3.1 Certificate of Incorporation (incorporated by reference to Katy's *
Form 10-K for year ended December 31, 1987, filed March 29, 1988)
3.2 By-Laws (incorporated by reference to Katy's Form 8-K filed *
February 15, 1996)
4.1 Rights Agreement dated as of January 13, 1995 between Katy and *
Harris Trust and Savings Bank as Rights Agent (incorporated by
reference to Katy's Form 8-A filed January 24, 1995)
10.1 Katy's Industries, Inc. 1994 Key Employee and Director Stock *
Purchase Plan (incorporated by reference to Katy's Registration
Statement on Form S-8 filed September 28, 1994, Reg. No. 33-55647)
10.2 Katy Industries, Inc. Long-Term Incentive Plan (incorporated by *
reference to Katy's Registration Statement on Form S-8 filed
June 21, 1995, Reg. No. 33-60443)
10.3 Katy Industries, Inc. Non-Employee Director Stock Option Plan *
(incorporated by reference to Katy's Registration Statement on
Form S-8 filed June 21, 1995, Reg. No. 33-60449)
10.4 Katy Industries, Inc. Supplemental Retirement and Deferral Plan
effective as of June 1, 1995.
10.5 Katy Industries, Inc. Directors' Deferred Compensation Plan
effective as of June 1, 1995.
10.6 Katy Industries, Inc. Form of Compensation and Benefits
Assurance Agreement (covering Tier I employees: John R. Prann, Jr.,
Glenn W. Turcotte and Robert Baratta).
10.7 Katy Industries, Inc. Form of Compensation and Benefits Assurance
Agreement (covering Tier II employees: Michael G. Gordono).
13 1995 Annual Report to Shareholders of Katy
21 Subsidiaries of registrant 13
23 Independent Auditors' Consent
27 Financial Data Schedule
* Indicates incorporated by reference.
Exhibit 21
SUBSIDIARIES OF REGISTRANT
The following list sets forth subsidiaries of Katy Industries,
Inc. as of February 29, 1996, with successive indentation indicating
parent/subsidiary relationships of such subsidiaries. The percentage
(unless 100%) of outstanding equity securities owned by the immediate
parent and the state of jurisdiction or incorporation of each such
subsidiary is stated in parentheses. Omitted subsidiaries do not, in
the aggregate, constitute a "significant subsidiary".
American Gage & Machine Company (Illinois)
Walsh Press Company (Illinois)
Bach Simpson, Inc. (Delaware)
Bach-Simpson, Ltd. (Ontario, Canada)
Bee Gee Holding Company, Inc. (Florida) (39%)
Bush Universal, Inc. (New York)
Hamilton Precision Metals, Inc. (Delaware)
Waldom Electronics, Inc. (Delaware)
C.E.G.F.(USA), Inc. (Delaware) (95%)
Duckback Products, Inc. (Delaware)
Hallmark Holdings, Inc. (Delaware) (Formerly Elgin Watch International,
Inc.)
Diehl Machines, Inc.
GC Thorsen, Inc.
Glit/Gemtex, Inc.
Glit/Gemtex, Ltd.
Katy Oil Company of Indonesia (Delaware)
Katy-Teweh Petroleum Company (Delaware)
Katy-Seghers, Inc. (Delaware)
Peters Machinery Company (Delaware)
Schon & Cie, AG (Germany) (37.5%)
American Shoe Machinery Corporation, Inc. (Delaware)
Societe de Fabrication Europeenne des Machines, S.A.R.L.
(France)
Schoen Machinery U.S.A., Inc. (Illinois)
Schon Engineering KFT (Hungary) (51%)
Schon-Kaev-Eger KFT (Hungary) (58%)
Sinecure Financial Corp. (Colorado) (11%)
The Original Italian Pasta Products Co., Inc. (Massachusetts) (21%)
Exhibit 23
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statement No.
33-55647, Registration Statement No. 33-60443, and Registration Statement
No. 33-60449 of Katy Industries, Inc. on Forms S-8 of our report dated
February 29, 1996, appearing in this Annual Report on Form 10-K of Katy
Industries, Inc. for the year ended December 31, 1995.
/s/
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 29, 1996